ALBANY — A major economic development project planned for the Southern Tier may be threatened by the lack of natural gas connections, according to an upstate utility.

Lawmakers and the region's business leaders say that even though the Southern Tier is relatively close to the fracking operations of Pennsylvania, economic development is being hurt because there isn't enough pipeline capacity for natural gas.

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The New York State Electric and Gas Corporation recently outlined a major project proposed for the Southern Tier that would create almost 200 jobs, but is dependent on natural gas connections.The unnamed project would create 164 full-time jobs in one of the state’s most economically depressed areas, according to documents NYSEG filed with the PSC.

The company would invest $132 million in 375,000 square feet of manufacturing space, and 150,000 square feet of warehouse and office space in the Town of Nichols, located in Tioga County.

The Empire State Development Corporation is expected to provide a “significant” source of funding for the project, according to the documents.

NYSEG filed a request with the state to provide grant money for the project. The company hoping to build the factory is also looking at other states and a lack of natural gas capacity could cause it to turn elsewhere, according to NYSEG’s filing.

The filing does not explicitly say that the project would be affected by a result of pipeline capacity or state delays on pipeline decisions. But Republican state Sen. Jim Seward of Oneonta said a lack of pipeline capacity is hurting the region’s businesses.

“Industrial and commercial users are a little bit leery of relying on natural gas because of the lack of natural gas infrastructure being permitted in the state of New York,” said Dena Wiggins, president of the Natural Gas Supply Association. She said she has heard from multiple businesses concerned about building a plant or manufacturing facility that relies on natural gas in New York because the state is delaying permits.

Cuomo administration officials did not return request for comment.

The state is increasingly reliant on natural gas as older coal-burning power plants close or are converted to gas. New York City buildings and homeowners across the state have been switching from heating oil to cleaner-burning natural gas. A new gas-burning power plant now being constructed in the Hudson Valley, which the state views as a partial replacement for the power generated by the Indian Point nuclear facility, will significantly increase demand in that region.

But pipelines needed to bring in the gas are meeting strong resistance from community groups and environmental activists fighting the spread of natural gas infrastructure in New York. Pipelines are also increasingly being scrutinized as a significant source of methane pollution, a potent contributor to global warming.

The state has yet to decide on a major pipeline in the Southern Tier, the Constitution, that would increase capacity, as well as New York’s use of fossil fuels.

NYSEG is increasingly offering large customers “interruptible contracts” which allow for the utility to shut off gas supply, after a 24-hour notice period, according to Alexander Mathes, executive director of Otsego Now, the region’s economic development group. In a letter filed with the PSC, Mathes wrote that economic development in the region could be endangered by the lack of gas. He pointed to the Oneonta Rail Yards development, a 600,000-square-foot business park, as an example.

In the Capital Region, National Grid is also seeing an increased demand for gas, and large customers are being offered “interruptible service.” To meet increasing commercial and residential demand, New York will need pipeline capacity, the utility says.

“On the supply side, we do need it,” Bill Flaherty, regional director for National Grid in the Eastern Division said. “Customers are seeing these low prices. We have communities that would love us to go into them. If the prices stay low, we’re going to see increased demand, we’re going to have to address the supply issue.”

The state Department of Environmental Conservation has delayed the final approval of the Constitution pipeline for more than a year, which advocates say would ease pipeline capacity. The Constitution has become a major battle for environmental groups that oppose natural gas infrastructure, and who see the project as a way to increase New York’s dependence on fossil fuels at a time when they want more renewable energy sources. On Thursday, New Yorkers Against Fracking and other groups released an ad calling on the Cuomo administration to reject the pipeline.